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Deutsche Bank Investigation

Deutsche Bank is Germany’s leading bank founded in 1870, with a strong position in Europe and a significant presence in the Americas and the Asia Pacific. Although the Bank was once known for its aggressive efforts to compete with Wall Street institutions, it has shrunk after years of losses as a result of problems including a bloated investment bank and trading desk and costly legal settlements tied to the sale of toxic mortgage securities. As a matter of fact, despite the bank’s valued company value in integrity, discipline, and client-centricity, earlier this Thursday, its headquarter in Frankfurt and five more offices were searched by one hundred seventy officers under a money-laundering investigation involving hundreds of millions of euros.

Prosecutors in Frankfurt are looking into whether Deutsche Bank (DB) helped customers set up offshore companies in a tax haven while failing to report suspicious transactions. According to New York Times, Deutsche bank confirmed in a statement that the police were investigating several of its offices in Germany and said the investigation related to the Panama Papers, a trove of files that put a spotlight on global money laundering. “We are cooperating fully with the authorities,” Deutsche said in the statement.

The Panama Papers were published in April 2016 by an international consortium of journalists using records from the Panamanian law firm Mossack Fonseca. The papers revealed that billions of dollars were being diverted through offshore companies to avoid tax and regulation. Politicians, corporations, and celebrities across the world were caught up in the scandal, and there were some high-profile resignations.

The scale of the legal threat posed by the investigation remains unclear, but paper and electronic documents were gathered during Thursday’s raid. Both the bank and prosecutors said the probe is related to the Panama Papers, a 2016 leak of confidential documents that exposed international money laundering networks and shell companies, but sources say that the investigation covers events that happened as recently as this year.

Deutsche Bank's problems are myriad. Shares in Deutsche Bank have plummeted nearly 6% since the raids commenced, at one point dropping below €8 ($9.10) to reach a new all-time low. Deutsche Bank has spent over $19 billion on legal costs since 2008, including $7.2 billion on a settlement with the US government in January 2017 over claims that it packaged and sold toxic mortgages. The bank has also suffered regular turnovers in top management: Christian Sewing, who became chief executive in April this year, was the bank’s fourth chief executive or co-chief executive in four years. The company is also in the middle of a restructuring plan that is expected to cut more than 7,000 jobs by the end of 2019.

At the end of the day, though, most investors believe that Deutsche is a relatively strong German consumer and commercial bank with an underperforming investment bank attached to it. However, that relationship is getting more tenuous as senior management in Frankfurt cuts investment banking and trading staff aggressively to manage risk.